I posted a shorter version of this about a year ago, but after yet another hot deal incident I was inclined to come back to it. So here goes!:
"Will Hot Deals be the END of retailers?"
... obviously, this is a bit of an overstatement, but it does hold some truth as I'm sure many of you would agree. Now, as you can imagine, most of the hot deals that can be found on such internet sites and forums usually create a net loss (or NO net gain) for businesses. It's these exceptional deals that from time to time, a retailer or e-tailer will offer that they realize they are taking a loss, but for the sake of drawing in the customer, they will accept the loss in hopes of gains for compensated sales. Now let me explain:
Retailers offer advertised sales on a regular basis on select items. Typically they will under-price these particular items where they will either lose money or make nothing. This will entice people to come in to their store or shop at their web store-front, and once the customer is in their store they anticipate that they will purchase other items as well. That's how they make their money back. I worked for a Grocery store, which uses the same tactics, and actually, I was made aware that competition is so fierce that it forced them to drive prices down to a point where they make NO net profit on grocery items! Nearly all profits are instead derived through special services such as from the bakery, floral section, prepared foods, and catering serivces! This was not enough, and MANY chains ended up going under in my area (North Jersey). In the past 5 years or so, I have seen the same grocery stores getting new management and being constantly bought out by a new chains as each one would successively fail and file for bankruptcy. I would see stores go from Food town to Adams, to Grand Union, to Stop and shop... probably all within 2 years!
Now you would think something like this would be self-correcting in the retail world (afterall, why would they continue to take losses by offering hot deals), but with the competitive nature of businesses (especially with the rise of e-business), the only way to survive in today's world is to offer lower prices then your competitor. Unfortunately this becomes a vicious cycle. Profits become more and more difficult to obtain, and cause many retailers to go under. Think of all the companies in the past couple years who have experienced major finacial problems and have filed for bankruptcy (Office Depot, K-Mart), have little or no projections for profit, or have gone under completely (Value America, Onvia)!
This trend has lead to a new market: Those who capitalize on some of those super-hot deals, and engage in private sales seeking profits on such sites as eBay. Now this may be a good way to make a buck or even a living, but this only hurts the economy. Think about it... engaging in this ferengi activity not only cause the retailers who pay taxes and are an integral part of our economy to directly incur a loss on your ferengi purchases, but you additionally are essentially stealing their sales by turning around and selling this merchandise on the private market.
If one rather sought income in a regular paying job, his productiveness will then be contributing to our economy. There are many more factors envolved, and one could go as far as to say that hot deals may be hurting the job industry, but I won't even go there.
So let's pause for a second and recap with an example:
Bob purchases 10 Product X's at $80 at Vendor X, who's purchasing price is $100
Bob sells all 10 Product X's on eBay for $140 each
Result:
- Bob makes a killing at $60 profit per piece!
- Vendor loses $200
- Vendor and retail world at large lose potential sale of 10 pieces
Okay, so obviously there will always be those who are spendthrift or simply pay retail price, but they are becoming rarer and rarer. Now of course, this isn't the main reason for the recent decline in retail business, but it sure is a contributing factor.
It seems to me that hot deals are getting worse (which is evidence that it IS starting to correct itself), but not just in the sense that better deals are becoming rarer, but rather people are starting to get greedier and greedier while they try to take advantage of the 'system.' I'm not just referring to cases where people capitalize on deals simply to resell for profit buying 10's or hundreds of super-low priced items, but also to the reactions I've seen to pricing-errors. Case in point, look at the age-old buy.com Hitachi monitor fiasco or the best-buy Geforce 4 error as examples. People jump on the deal knowing full well it was a pricing error. I mean come on, does anyone honestly believe that Best Buy would, even if they could, take a $200 in loss for each item?
And naturally, after the cancellation notices start coming in, which everyone expected, the bitching and whining start pouring in. Talks about lawsuits, and boycotting... it's all ridiculous. I saw the thread on this old deal and had posted this:
"You guys are crazy to expect Best Buy to honor that price, which was clearly a pricing error. They would be taking over a quarter million loss! You all knew full well that this was a mistake, and should have expected nothing. To say that this was a bait and switch case is ridiculous. Obviously, companies are well aware of the troubles pricing-errors cause (especially after the buy.com hitachi monitor fiasco), and they would be quite stupid to pull something like this simply to get HITS on their web store-front. This campaign against Best Buy isn't about righteousness or any of that crap and you all know that... this is about greed. You guys are turning into scavengers who will grab any chance to take advantage of simple common human error, and it really sickens me."
Naturally, everyone got offended, and just moved on with their lawsuit talks.
I mean is it just me, or are Hot Deals changing people? Perhaps we were greedy all along and just waiting for something to latch on and take advantage of?
"Will Hot Deals be the END of retailers?"
... obviously, this is a bit of an overstatement, but it does hold some truth as I'm sure many of you would agree. Now, as you can imagine, most of the hot deals that can be found on such internet sites and forums usually create a net loss (or NO net gain) for businesses. It's these exceptional deals that from time to time, a retailer or e-tailer will offer that they realize they are taking a loss, but for the sake of drawing in the customer, they will accept the loss in hopes of gains for compensated sales. Now let me explain:
Retailers offer advertised sales on a regular basis on select items. Typically they will under-price these particular items where they will either lose money or make nothing. This will entice people to come in to their store or shop at their web store-front, and once the customer is in their store they anticipate that they will purchase other items as well. That's how they make their money back. I worked for a Grocery store, which uses the same tactics, and actually, I was made aware that competition is so fierce that it forced them to drive prices down to a point where they make NO net profit on grocery items! Nearly all profits are instead derived through special services such as from the bakery, floral section, prepared foods, and catering serivces! This was not enough, and MANY chains ended up going under in my area (North Jersey). In the past 5 years or so, I have seen the same grocery stores getting new management and being constantly bought out by a new chains as each one would successively fail and file for bankruptcy. I would see stores go from Food town to Adams, to Grand Union, to Stop and shop... probably all within 2 years!
Now you would think something like this would be self-correcting in the retail world (afterall, why would they continue to take losses by offering hot deals), but with the competitive nature of businesses (especially with the rise of e-business), the only way to survive in today's world is to offer lower prices then your competitor. Unfortunately this becomes a vicious cycle. Profits become more and more difficult to obtain, and cause many retailers to go under. Think of all the companies in the past couple years who have experienced major finacial problems and have filed for bankruptcy (Office Depot, K-Mart), have little or no projections for profit, or have gone under completely (Value America, Onvia)!
This trend has lead to a new market: Those who capitalize on some of those super-hot deals, and engage in private sales seeking profits on such sites as eBay. Now this may be a good way to make a buck or even a living, but this only hurts the economy. Think about it... engaging in this ferengi activity not only cause the retailers who pay taxes and are an integral part of our economy to directly incur a loss on your ferengi purchases, but you additionally are essentially stealing their sales by turning around and selling this merchandise on the private market.
If one rather sought income in a regular paying job, his productiveness will then be contributing to our economy. There are many more factors envolved, and one could go as far as to say that hot deals may be hurting the job industry, but I won't even go there.
So let's pause for a second and recap with an example:
Bob purchases 10 Product X's at $80 at Vendor X, who's purchasing price is $100
Bob sells all 10 Product X's on eBay for $140 each
Result:
- Bob makes a killing at $60 profit per piece!
- Vendor loses $200
- Vendor and retail world at large lose potential sale of 10 pieces
Okay, so obviously there will always be those who are spendthrift or simply pay retail price, but they are becoming rarer and rarer. Now of course, this isn't the main reason for the recent decline in retail business, but it sure is a contributing factor.
It seems to me that hot deals are getting worse (which is evidence that it IS starting to correct itself), but not just in the sense that better deals are becoming rarer, but rather people are starting to get greedier and greedier while they try to take advantage of the 'system.' I'm not just referring to cases where people capitalize on deals simply to resell for profit buying 10's or hundreds of super-low priced items, but also to the reactions I've seen to pricing-errors. Case in point, look at the age-old buy.com Hitachi monitor fiasco or the best-buy Geforce 4 error as examples. People jump on the deal knowing full well it was a pricing error. I mean come on, does anyone honestly believe that Best Buy would, even if they could, take a $200 in loss for each item?
And naturally, after the cancellation notices start coming in, which everyone expected, the bitching and whining start pouring in. Talks about lawsuits, and boycotting... it's all ridiculous. I saw the thread on this old deal and had posted this:
"You guys are crazy to expect Best Buy to honor that price, which was clearly a pricing error. They would be taking over a quarter million loss! You all knew full well that this was a mistake, and should have expected nothing. To say that this was a bait and switch case is ridiculous. Obviously, companies are well aware of the troubles pricing-errors cause (especially after the buy.com hitachi monitor fiasco), and they would be quite stupid to pull something like this simply to get HITS on their web store-front. This campaign against Best Buy isn't about righteousness or any of that crap and you all know that... this is about greed. You guys are turning into scavengers who will grab any chance to take advantage of simple common human error, and it really sickens me."
Naturally, everyone got offended, and just moved on with their lawsuit talks.
I mean is it just me, or are Hot Deals changing people? Perhaps we were greedy all along and just waiting for something to latch on and take advantage of?
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